Morgan Stanley Says SolarCity 'Struggling To Exceed Lofty Expectations'

Morgan Stanley commented on SolarCity Corp SCTY Thursday after the company reported a narrower than expected Q3 loss. The firm maintained an Equal-weight rating and $92 price target.

Analyst Timothy Radcliff noted that the “company continued to grow at a rapid pace, booking 230MW or >150 percent more than 3Q13. Deployments of 137MW were at the low end of guidance, however, and the midpoint of 2014 deployments has declined from 525MW to 513MW as a result.

“Although the decline is modest and volume growth remains robust relative to 2013, we believe that management may continue struggling to exceed relatively lofty expectations in the coming quarters.”

Radcliff felt that guidance was “decent but not spectacular,” and “in terms of long-term outlook, the company reiterated its all-in cost goal of reaching $2.50 by 2017, which we believe will position the company favorably.”

The analyst report concluded that “SolarCity faces increasing competition; as a result, both market share and profitability of each MW developed decline moderately in the next 3-5 years.”

Under the firm’s base case scenario, “retained value reaches $7.8 billion by YE 2016 and DCF implies $92 per share, assuming 17.5 percent cost of equity and 2 percent terminal growth.”

SolarCity recently traded at $54.82, up 0.7 percent.